Rio Tinto in talks to buy Arcadium Lithium in deal shaping up to be $US4bn-plus

Rio Tinto is in talks to buy Arcadium Lithium for a premium of at least 30 per cent to its undisturbed share price. Picture: AAP

Australian listed mining giant Rio Tinto is in talks to buy the US-listed Arcadium Lithium in a deal shaping up to be worth at least $US4bn ($5.9bn).

The Australian’s DataRoom column flagged talk in the market last week that Rio Tinto could be looking at the Australian and New York dual-listed miner Arcadium Lithium ahead of a rally in the share price of Rio.

A spokesperson for Rio Tinto declined to comment. However, it is understood that plans for a deal by the Jakob Stausholm-led Rio team are afoot with a proposal that is at least a 30 per cent premium to the Arcadium Lithium share price.

Rio Tinto, which is one of the largest miners in the world, has a market value worth of almost $47bn on the ASX.

Before DataRoom’s reports last week, Arcadium Lithium’s market value was about $US3bn but it began to rally on the back of the report on October 3.

Its shares were around $US2.83, or $4, on October 2 with its market value at about $US3bn, but are now over $US3, up almost 6 per cent, closing at $4.18 on the ASX.

There have been suggestions for some time that Rio Tinto may join mining giant peer BHP in embarking on a big acquisition.

News that BHP was trying to buy Anglo American emerged on Anzac Day in April.

Arcadium operates in the same jurisdictions as Rio, including Argentina where Rio Tinto has the Rincon Lithium project, and has hard rock lithium in ­Canada where Rio has operations in commodities iron ore and mineral sands.

It is the result of the $US10bn merger last year between the US-listed Livent and the Australian listed Allkem, with the combined group renamed Arcadium Lithium.

Rio also has its Jadar Valley lithium project in Serbia.

Talk of Rio Tinto buying a lithium player emerged out of the recent global gold mining conference in Denver, Colorado, where some of the most influential mining executives were present, and sources were pointing to Arcadium Lithium or Albemarle.

Rio Tinto has previously been deterred from buying a lithium miner because it viewed the sector as overvalued as values in the sector soared last year with expectations of more electric vehicles amid the move to clean energy.

But the rollout of electric vehicles has not been as swift or as easy as some had expected.

Rio Tinto is understood to have started looking closely last year at a takeover target at the time of the Allkem and Livent merger last year.

Embarking on an acquisition is one way to build a big position quickly in lithium, the material that is used to make batteries used in electric vehicles.

Previously, investment bank Macquarie Capital has been close to Rio Tinto, while Arcadium Lithium, chaired by Australia’s Peter Coleman, is likely advised by a Wall Street investment bank.

Mergers and acquisitions have been clearly on the agenda of big miners, with the $230bn BHP making efforts to buy London-listed mining giant Anglo American.

Its last offer valued the target at $74.2bn.

But its offer was rejected and Anglo American instead opted to pursue a company break-up.

Centerview Partners, Morgan Stanley and Goldman Sachs worked to defend Anglo American, while BHP was advised by UBS and Barclays

One industry expert said Rio Tinto was acquisitive, although lithium formed a reasonable amount of its portfolio already.

Buying another group would provide it with more production.